Government IT specialist Booz Allen Hamilton (BAH -0.57%) just topped quarterly expectations and sees the potential for more upside from here. Investors are buying in, sending shares up as much as 7% on Friday. As of 12:45 p.m. ET, the stock was up 4%.
Strong results and a bright future
Booz Allen provides a range of technological services to government and private sector customers, with a heavy emphasis on the defense and intelligence markets.
Booz Allen earned $1.33 per share in its fiscal fourth quarter ended March 31 on revenue of $2.77 billion, surpassing Wall Street's consensus estimates for $1.23 per share in earnings on sales of $2.72 billion. Net income was up 287% and revenue jumped nearly 14% year over year, fueled by contract wins in the federal defense and civil markets.
Booz Allen also grew its head count by 7.4% over the past year, a positive sign for the company. Consulting operations like Booz Allen tend to hire based on future contracted business. Gross margin in the quarter was 54.7%.
The company expects to generate between $825 million and $925 million in net cash from operations in its new fiscal year, with earnings between $5.80 and $6.05 per share. Wall Street was expecting the midpoint of that range.
Is Booz Allen Hamilton stock a buy?
Rival Palantir gets a lot of the headlines, but Booz Allen Hamilton is a powerful force in the world of defense IT. The company generated about $600 million in sales from artificial intelligence (AI)-related work, and it expects that number to grow in the years to come.
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No two government contractors are exactly alike, and comparisons can only go so far. But Booz Allen today trades at 1.8 times future sales and 26 times expected earnings, a significant discount to Palantir's 17 times future sales and 63 times expected earnings.
For those interested in the sector but worried about valuation, Booz Allen Hamilton deserves a closer look.
